Nomura maintained its ‘Neutral’ call on Amara Raja Energy and Mobility, with a target price of Rs 1,100, implying an upside of 15%.
The brokerage said that a lower GST rate can improve revenue growth for OEM customers and pricing power in replacement batteries (59%). Plus, Nomura believes that as the new tubular plant (ramp up in Q2 FY26) and new smelter (delayed to Q3 FY26) start contributing, margins should be around 14% by FY27/28.
Nomura on Amara Raja Energy: Expect margin recovery
However, the brokerage house noted two concerns about the lithium-ion (Li-on) cell business. The first one is that NMC (nickel manganese cobalt) tech is going out of favour, and the GST cut for ICE raises utilisation risks. Secondly, the import prices of LFP (lithium iron phosphate)/NMC at $50/$60.
This led Nomura to cut FY26/27 revenues estimates by 2% to factor in a weaker industrial segment with a revenue CAGR of 10% over FY26-28 and EBITDA margins at 12.6% for FY26 and 13.9% for FY27, compared to 14% and 14.1% earlier. This subsequently resulted in reductions of 18% and 8% in EPS estimates for FY26 and FY27.
Nomura on Amara Raja: Margins impacted by higher trading revenues
The company’s margins were impacted by higher trading revenues, which should normalise, said the management. Price hikes are taken to pass on high commodity costs.
The exports declined by 7-8% YoY, and the Telecom business saw a drop of 30% YoY, which contributes 6-7% of revenue. Also, despite 15% UPS industrial growth, overall Industrial revenue declined by 3-4% YoY.
The management of Amara Raja Energy said that the four-wheeler replacement was up 5% year-over-year in Q1 FY26, while the original equipment sales were up 12-13% YoY.
Nomura on Amara Raja: Raw material prices are rising
Talking about the Lithium cell, the company said that raw material prices have started moving up. A one GWH NMC factory will start by the end of FY27.
Amara Raja Energy stock performance
The share price of Amara Raja Energy has risen 4.4% in the last five trading sessions. The stock has declined by a per cent in the last one month and 2% in the past six months. Amara Raja Energy’s share price has erased 36% of investors’ wealth in the last one year.